Mettler-Toledo International Inc. (NYSE:MTD) Q1 2017 Earnings Conference Call - Final Transcript
May 04, 2017 • 05:00 pm ET
a strong and broad-based sales growth.
On the next slide, we outline sales growth by product line, which is also broad-based. Laboratory sales increased by 13%, while industrial sales increased by 12%, and our food retailing business grew by 8%. Troemner benefited from -- benefited our lab growth by approximately 3%. All comparisons are in local currency and versus the prior year.
Turning to slide number 6, let me walk you through the key items on our P&L. Our gross margins were 57.7%, a 210 basis point improvement over the prior year amount of 55.6%. While comparisons were relatively easy as gross margins were slightly down last year, we had a couple of factors that helped our margins this quarter. First, we had good productivity gains in our plants and in our service business, given the strong sales growth. Second, we continue to benefit from pricing, which was up by 190 basis points, which increased our gross profit margin by approximately 80 basis points.
Material costs were neutral in the quarter with savings in certain material categories offset by higher commodity prices in others. We are very pleased with the increase in gross margins and expect further improvement as the year progresses, although we won't have the same benefit of easier comparisons as we did here in the first quarter.
R&D amounted to $31.4 million. That represents an 11% increase in local currency. Our growth in R&D in the quarter was driven by the timing of some new product launches. SG&A amounted to $184.2 million. That's an 11% increase in local currency over the prior year. Variable compensation, investments in our Field Turbo program and employee benefit costs all contributed to the increase. Our adjusted operating income reached $127.3 million in the quarter, and that's a 25% increase over the prior year amount of $102.0 million. Currency reduced operating profit by about $1.4 million in the quarter, a little worse than we expected last time we spoke. Our adjusted operating margins reached 21.4%, and that's a 250 basis point increase over the prior year.
A couple of final comments on the P&L. Our amortization expense was $10.0 million in the quarter, while interest expense was $7.7 million in the quarter. Our other income was $5.7 million in the quarter, and that included a nonrecurring gain of $3.4 million from the sale of a manufacturing facility in Switzerland. This is part of our initiative to reduce our Swiss cost base by consolidating certain operations into an expanded facility. For comparison reasons, we've excluded this gain from adjusted EPS. And also included in other income is financial income of about $2.3 million.
Now let's cover taxes. We have assumed an annual effective rate of 22% for 2017, which reflects a 2% reduction from last year due to the new accounting policy with respect to the excess tax benefits on stock option exercises. As a reminder, prior to 2017, this benefit was recorded in equity and was reflected in a reduction in diluted